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If you want your children to grow up making sensible financial decisions, it pays to start early. Guiding your children through the basics of saving, budgeting and spending from a young age will help them to develop good habits for life.

1. Start early
Introduce numbers as early as possible with games and books. This is a vital concept young children need to grasp before they can understand money, but almost one in five Australian children start school without knowing how to count or recognising numbers.

Young children are naturally curious so this is a great time to expose them to everyday money. Take them grocery shopping, and take them to the bank. Talk to them about what you’re doing, and answer any questions. When paying for things around young children, try to use cash (which can be difficult in todays cashless society!) – it’s visual, tangible and easy to understand. Paying on debit or credit can give children the impression that you can get whatever you want if you just have a magic plastic card.

2. Introduce pocket money
When they get a bit older, start giving a small allowance to teach short and long-term saving, and good spending habits. Talk to them about how to use their money – it’s okay to spend some, but it’s also a good idea to keep some for a rainy day.

If they have their sights set on a special new toy, it’s time to learn how to save. You can show them the rewards of work by giving them small jobs around the house in exchange for pocket money. When they’ve saved enough (and if they still want the toy!) take them to buy it and let them hand over the cash themselves.

It’s also important to let them make their own choices about what to do with their money, so they can understand the consequences if they run out.

3. Involve them in family budgets and shopping
Talk to children about where the family’s money comes from, and how you use it to cover things like food, household items, utilities and internet. Get them to help you plan, make shopping lists and find the best value products.

Teach them budgeting through delayed gratification. If you’re planning a big trip and they want to go out for dinner tonight, let them know you’re saving your money for your holiday – and if you eat at home now you’ll be able to use that money for something fun later.

4. Open a bank account, that’s their very own
Opening their first savings account is a milestone moment, ideally in the later years of primary school. Look for one with minimal fees but the opportunity to earn interest if regular deposits are made. It can be very powerful for children to see how money can make more money (even if it’s just a few dollars) through compound interest.

Once your child starts high school and becomes more independent, get an ATM card so they can access their cash, and talk to them about keeping their PIN safe and their money secure online.

5. Add responsibility
To increase the responsibility you give older children you could involve them in household budgeting discussions – let them help plan family holidays, or decide which sports and other activities will fit into the family’s budget.

Encourage teenagers to start work when they can – whether it’s a paper run, babysitting for the neighbours, or a casual weekend job. A record of small part-time jobs will also look good on their CV when they start their career.

If you do decide to give loans – such as for a new mobile phone, or if they do run out of money – use it as a chance to teach them about credit and have the money paid back with interest on set payment terms. And if your child goes over their phone bill, don’t simply pay it for them – give them a strategy to earn the money to pay it back.

6. Model good behaviour
As a parent, you have a big influence on your children’s spending habits and their attitudes towards money. If you’re running up debts, impulse buying or arguing about money with your partner, your children will notice. Make money a regular topic of conversation, answer any questions, and model good financial habits. It’s important to teach by example.

Teaching your children to be responsible with money is an important life skill, but it’s not the be all and end all. We all need to know how to save and make smart decisions, but we can also use money to buy things and have fun.

If they end up making a few mistakes along the way, that’s OK – everyone does. It’s what they can learn from those financial hiccups that really matters.

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